What Happens After Foreclosure?
Foreclosure is the end of your relationship with a home. However, it is not the end of your life. After foreclosure, there are still tasks to be completed and decisions to make.
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Relocate
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Begin looking for a rental home as soon as the foreclosure is evident. Your credit score will go down because of the foreclosure, and a low credit score will make relocating difficult. Just as an example, the Federal Housing Administration requires a five-year period after the foreclosure before you can qualify for a new FHA-backed loan.
Plan for Taxes
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Under the Mortgage Foregiveness Debt Relief Act of 2007, you may not have to pay taxes on the difference between your mortgage and the ultimate sale price of the home--the amount of the loan that is "forgiven" by the bank--as long as the property in question was your primary home and certain other conditions applied.
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Rebuild Credit
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Foreclosure is often accompanied by other debts, like credit defaults. Soon after the foreclosure, begin repaying these debts. This way you can repair your credit in order to purchase a home in the future.
Gather Support
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After foreclosure, many people find that even renting a home is impossible due to a lower credit score or the lack of funds. Many have found that the support of family and friends is essential as they seek new housing, and these supporters may even help with expenses.
Misconceptions
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Contrary to common belief, a foreclosure does not always end in bankruptcy. Many homeowners are able to find housing and start over with the help of the court system.
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References
- Photo Credit Image by Flickr.com, courtesy of Jeff Turner
